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TMI Blog2013 (7) TMI 72X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale therein by virtue of Entry 52 of List II of the Seventh Schedule to the Constitution of India. However, this power is subject to the limitations imposed by the Constitution itself, particularly Part XIII thereof. The imposition of a compensatory tax, being a judicially devised exception to the restrictions of Articles 301 and 303 of the Constitution of India, the tests judicially enunciated in Jindal Stainless Ltd. (2010 (4) TMI 849 - SUPREME COURT OF INDIA) to examine whether the impugned tax on movement of goods from one area to another is, in effect and substance, a compensatory tax, must strictly be applied before the validity of an enactment imposing the impugned tax can be upheld, notwithstanding non-compliance of the requisites of Article 304(b) of the Constitution of India. What distinguishes a compensatory tax is that a compensatory tax is imposed for a specific purpose or a few specific identifiable purposes, to pay for expenses in connection with specific projects, whether completed, in progress or in contemplation, which provide specific, tangible, measurable benefits to the tax payers as a class and is based on the ‘principle of equivalence’ and/or ‘quid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India not having been obtained, before enactment of the impugned Entry Tax Act, this court is constrained to hold that the impugned Entry Tax Act is ultra vires Section 304(b) of the Constitution of India - writ petitions are disposed of accordingly. - W.P. Nos. 464, 465, 509, 562, 565, 567, 595, 615, 619, 621, 624, 627, 628, 629, 646, 648, 649, 659, 662, 673, 674, 675, 682, 688, 695, 11407 (W), 18582 (W) of 2012 - - - Dated:- 24-6-2013 - Indira Banerjee,JJ. JUDGMENT Indira Banerjee, J. In these writ petitions the writ petitioners, who are required, in connection with their business, to bring goods from all parts of India or abroad, into various local areas in West Bengal for sale, use or consumption therein, have challenged the validity of the West Bengal Tax on Entry of Goods into Local Areas Act, 2012 (hereinafter referred to as the impugned Entry Tax Act ). As all these writ petitioners involve a common question of law, they were heard together along with similar writ applications in the Appellate Side and are now being disposed of by this common judgment and order. One of the Writ Petitioners is an export oriented unit, having its fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed or acquired or obtained the specified goods, as shown in the original tax invoice, invoice or bill or stock transfer advice or document of like nature; or (b) where the tax invoice, invoice or bill or stock transfer advice or document of like nature is not available or is not produced, or where the price or cost of such specified goods is not separately mentioned therein, or where the tax invoice, invoice or bill or stock transfer advice or document of like nature produced is proved to be false or the information furnished therein is found to be incorrect, the prevailing market price of such specified "goods in the local area; Section 2(1) (m) "local area" means the areas within the limits of a Municipal Corporation or any municipality or Gram Panchayat or Notified Area Council or any other local authority, by whatever name called, constituted or continued in the State of West Bengal by any law for the time being in force; Section 2(1) (o) "person" includes any company or association or body of individuals whether incorporated or not and also a Hindu undivided family, a firm, a local authority, Government of India, the Government of any State or Union Territory, a statutor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which shall not exceed five per centurm when such tax is levied on taxable turnover of imports, and. different rate or rates of tax may be specified in respect of different specified goods, or for the different categories of consumption or use or sale of such specified goods, or for different local areas. (3) The State Government shall have regard to financial needs for development and facilitation of trade, commerce and industry in the local areas of the State while specifying the rate or rates of tax under subsection (2). (4) Subject to such restrictions and conditions as may be prescribed, no tax. under this Act shall be levied, and accordingly the import value of goods shall not be included in turnover of imports of a dealer or an importer other than a dealer, in respect of- (a) entry of specified goods dispatched, at the time of entry into a local area, directly to a place for immediate export of such goods out of the territory of India within the meaning of sub-section (1) of section 5 of the Central Sales Tax Act. 1956. from such place in the same form in which such goods have been entered into the local area; 74 of 1956. (b) entry of specified goods dispatched at t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notification. (3) The State Government may, by notifiation, withdraw, cancel or vary any notification issued under sub-section (1), with prospective or retrospective effect. Section 8. Declaration to be made by a dealer or an importer other than a dealer for entry of goods - (1) In respect of entry of any consignment of specified goods into a local area by or on behalf of a dealer or an importer other than a dealer for consumption, use or sale therein, the dealer or the importer other than a dealer shall make a declaration in such form, in such manner and containing such particulars relating to entry of such goods, as may be prescribed and such a declaration shall be carried along with the specified goods till such goods reach the destination within the local area. (2) The declaration referred to in sub-section (1) shall be produced under such circumstances, and in such manner, as may be prescribed, upon demand by the Commissioner or by such other person authorized by the Commissioner in this behalf, at any place within a local area. Section 9. Return and payment of tax by registered dealers (1) Every registered dealer shall, either electronically or manually, su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts or loans, such sums or money as the State Government may consider necessary. Section 18. Utilization of proceeds of levy (1) The proceeds of the levy under this Act, net of the cost of collection and incidental expenses, shall be utilized for the development or facilitating the trade, commerce and industry in the State which shall include the following:- (a) construction, development and maintenance of roads and bridges for linking the market and industrial areas; (b) construction, development and maintenance of transport hubs and cold storage facilities wherever possible; (c) construction, development and maintenance of linking the markets and industrial areas to railway stations, ports, waterways and airports, wherever possible; (d) construction, development and maintenance of railway overbridges and sub-ways; (e) creating infrastructure for supply of electricity and water to industries and other commercial complexes; (f) creating, development and maintenance of other infrastructure for the furtherance of trade, commerce and industry in general; (g) providing finance, aids, grants and subsidies for creating, developing and maintaining pollution free enviro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... State of West Bengal and three other writ petitioners. Mr. J.P. Khaitan appearing on behalf of the writ petitioners in W.P. 509 of 2012, ACC Ltd. Anr. Vs. State of West Bengal Ors. and five other writ petitioners along with Mr. Somak Basu, Mr. Sourabh Bagaria and Ms. Sutapa Roy Chowdhury, Mr. Samit Talukdar appearing on behalf of the Writ Petition in W.P. No.18582 (W) of 2012 Camco Multi Metal Ltd. Anr. Vs. The State of West Bengal Ors. and Mr. Mainak Bose appearing on behalf of the writ petitioner No. W.P. 562 of 2012 Godrej Consumer Products Ltd. Vs. The State of West Bengal Ors. and six other writ petitions, strenuously argued that the impugned Entry Tax Act is violative of Article 301 read with Article 304 (a) and (b) of the Constitution of India. Mr. Poddar submitted that the impugned Entry Tax Act is violative of Article 301 of the Constitution of India, which guarantees free trade, commerce and intercourse throughout the territory of India, read with Article 304 of the Constitution of India which enables the state to impose on goods imported from other States or Union Territories, any tax to which similar goods manufactured or produced in that State are subject, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at State as may be required in the public interest. However, reasonable restrictions, as may be required in public interest, cannot be introduced unless the Bill or amendment for the purpose is introduced or moved in the legislature with the previous sanction of the President of India. Citing the judgment of a Seven Judge Bench of the Supreme Court in Automobile Transport (Rajasthan) Limited Vs. State of Rajasthan reported in AIR 1962 SC 1402, Mr. Poddar argued that a taxing law may not be hit by Article 301 read with Article 304 if the tax sought to be imposed is compensatory in nature. Mr. Poddar argued that the Supreme Court had judicially crafted an exception to the provisions of Article 301 in Automobile Transport (Rajasthan Limited) Vs. State of Rajasthan (Supra). The Supreme Court held that a taxing statute can be protected from the vice of unconstitutionality, if the tax is compensatory in nature. Mr. Poddar submitted that, in Bhagatram Rajiv Kumar Vs. Commissioner of Sales Tax, Madhya Pradesh reported in (1995) Supp. 1 SCC 673 the Supreme Court held that if there was substantial or even some link between a tax imposed and the facilities intended to dealers, directly or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the service or facility. However, the post 1995 decisions in Bhagatram case and in Bihar Chamber of Commerce now say that even if the purpose of imposition of the tax is not merely to confer a special advantage on the traders but to benefit the public in general including the traders, that levy can still be considered to be compensatory. According to this view, an indirect or incidental benefit to traders by reason of stepping up the developmental activities in various local areas of the State can be brought within the concept of compensatory tax, the nexus between the tax known as compensatory tax and the trading facilities not being necessarily either direct or specific. The Supreme Court specifically overruled the theory as propounded in Bhagat Ram s case (Supra) and in Bihar Chamber of Commerce case (Supra) that some connection would make a levy compensatory. Mr. Poddar submitted that the Constitution Bench of the Supreme Court has, in Jindal Stainless Ltd. (2) (supra) pronounced the law relating to imposition of entry tax by State Legislature and the validity of the impugned Entry Tax Act has to be adjudicated in view the law laid down by the Supreme Court in Jindal Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 of the impugned Entry Tax Act could not be treated to be compensatory in nature, so as to construe any special advantage to trade, commerce and intercourse. Mr. Poddar submitted that the State is bestowed with the responsibility of providing good roads and bridges for tax paying citizens. The providing of roads and bridges as contemplated in Section 18 of the Entry Tax Act cannot be said to be for the benefit of the trading people of the local area who are subjected to the levy. The maintenance and construction of roads and bridges are met from the general revenue of the State. Irrespective of whether the goods are transported into the State from some other State or abroad, the State has the duty to provide facilities such as roads, bridges etc., which are not enjoyed just by persons who bring the notified goods, but by the public in general. No exclusive or special advantage is provided to the trading people. Mr. Poddar next argued that the provision in Section 18(1)(i) of the Entry Tax Act for providing financial aid, grants and subsidies to local bodies and State Government agencies is totally vague and devoid of any particulars. Mr. Poddar submitted that creation develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition filed on behalf of the State. Mr. Poddar argued that the contention of learned counsel appearing for the State, Mr. Avratosh Mazumdar, that it was not possible for the State to produce data, since the West Bengal Entry Tax Act, was a new enactment and no Entry Tax had been collected and the State would be able to justify the Entry Tax Act after its implementation, by showing that the State had, in fact, utilized the fund for development of trade and commerce for the benefit of others, was wholly fallacous. Mr. Poddar argued that it was not material that the Entry Tax Act was a new Act. It was open for the State to place data which could have been in the form of field project report, for levy of tax and utilization of its fund upon assessment of collection of tax. Mr. Poddar submitted that the State has not furnished particulars of even a single proposed project report or conceived idea where the amount of Entry Tax collected would be spent. The State had, thus, failed to discharge its burden as enunciated in the judgement of the Constitution Bench of the Supreme Court in Jindal Stainless Steel Ltd. (supra), as it had not placed any material before the Court to demonstrate t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue received by it. This fact is sufficient to declare the levy as not compensatory in nature, as it loses the character of fee and assumes the character of tax . Mr. Poddar submitted that the proceeds of Entry Tax could be appropriated to the West Bengal Compensatory Entry Tax Fund only if the State Legislature enacted any law for such appropriation. Under Article 199(1)(d) of the Constitution of India, any appropriation of money out of the Consolidated Fund of the State had to be done by way of Money Bill. Thus, the Entry Tax collected by the State is to be treated as general revenue at the hand of the State, at the first instance, and is to be credited into the State Consolidated Fund. Its utilisation would directly be dependent upon budgetary allocation to be made by the State Legislature by way of Money Bill . Mr. Poddar submitted that the State Legislature cannot be compelled to make the budgetary allocation of the proceeds of the Entry Tax for any specific purpose as the independence of the State Legislature in passing a Money Bill cannot be restricted by virtue of any provision in the Entry Tax Act. Thus the theory of quid pro quo as enunciated in the judgement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to make the levy compensatory. Mr. Poddar argued that the Government is entitled to enact a law levying Tax on entry of Goods into a local area. The power of the State Legislature to charge under Entry 52 of List II was in case of entry of goods into a local area. The court is, thus, required to examine the effect of the charging provision vis- -vis the utilisation of Fund. Entry Tax can be treated to be compensatory only and only if the Entry Tax collected is spent only for the benefit of the trading people of the said local area. By way of illustrative example, Mr. Poddar submitted that if Entry Tax amounting to Rs.10 crore was collected from a particular local area which is the local area under the Kolkata Municipal Corporation, the amount of Rs.10 crore would have to be spent for the benefit of trading people within the area of Kolkata Municipal Corporation. However, if out of Rs. 10 crore collected from the Kolkata Municipal Corporation area Rs. 5 crore was spent for providing trading facilities to the traders of other local areas the principle of equivalence and direct and immediate benefit to payers of Entry Tax of Kolkata Municipal Corporation area cannot be achieved a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ors. Vs. State of Jammu kashmir reported in (1996) 11 SCC 39. Mr. Poddar finally argued that under Section 2 (h) of the Entry Tax Act, the term entry of goods has been defined. The Entry Tax Act provides for levy of tax on entry of goods from outside the country into any local area within the State of West Bengal. By providing for levy of Entry Tax on entry of goods from outside the country, the State Legislature has acted beyond its legislative competence and has transgressed the power of the Parliament. In the context of his argument, Mr. Poddar referred to Article 286 of the Constitution of India which prevents the State Legislature from imposing tax on sale or purchase of goods, when such sale or purchase takes place in course of the import of goods into or export of goods out of the territory of India. Mr. Poddar also referred to Entries 41 and 83 of List I in the Seventh Schedule in terms whereof the Union legislature is empowered to legislate in relation to trade and commerce with foreign countries, import and export across customs frontiers and definition of customs frontiers and also in connection with duties of customs including export duties. Mr. Poddar argued t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atsoever. The legislature, in order to revalidate the law, can reframe the conditions existing prior to the judgment on the basis of which certain statutory provisions had been declared ultra vires and unconstitutional. Mr. S.K. Kapur, Senior Advocate appeared with Mr. Ananda Sen on behalf of the Writ Petitioners W.P. No.464 of 2012 Bharti Bharti Airtel Limited vs. State of West Bengal Ors., W.P. No.465 of 2012 Bharti Telemedia Limited Vs. State of West Bengal and W.P. 615 of 2012 Tata Teleservices Ltd. Vs. State of West Bengal Ors. in the Original Side adopted the arguments advanced by Mr. Poddar and also made further arguments at length. Mr. Kapur reiterated that whenever a law was impugned it was the burden of State to prove and the duty of the Court to see whether the impugned enactment facially or patently indicates quantifiable data on the basis of the which compensatory tax is to be levied and the Act must facially indicated the benefit which is quantifiable or measurable. In Jindal Stainless Steel Ltd. (supra) the Supreme Court held that the abovementioned principles would apply to any legislation under challenge whether it be a taxation law or non-taxation law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f West Bengal. This means that from the beginning the entry tax proceeds will be mixed up with the other funds of the State. According to Mr. Poddar as well as Mr. Kapur this provision contravenes the settled rule that no entry tax can be levied to augment the revenue of the State. By making a provision that the tax realized under the Entry Tax Act would be credited to the Consolidated Fund of West Bengal clearly offends the rule that such a tax ought not to be levied as a means of increasing the revenue of the State. Mr. Kapur argued that there were grammatical errors in Section 17, which render it unintelligible and meaningless. If the Act contains mistakes it is not for the Court to supply the omissions. But, even leaving the unintelligible parts aside, the use of the word may in express terms confers an option upon the State to direct that levy of Entry Tax may be credited to the compensatory fund. Mr. Kapur further submitted that the legislature had neither legislative authoirity nor any legislative power to reserve to itself a choice or right to elect whether it would make a credit to the fund or not. Since the fund had to be utilized only to provide a service/facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parent Act must prevail and the Rules cannot supplant or replace the provisions of the Act. In any case rules only reiterated that utilization of the proceeds shall be in accordance with Section 18 which is otiose and unnecessary. Rule 4 evidences that the parameters will not be followed because it envisages that the criteria as well as the amounts for allocation among concerned departments of the State Government shall be determined by a Committee. Mr. Kapur further submitted that the details and what should be facially apparent from the Act is not even to be found in the purported Rules which are redundant and do not advance the State s argument at all. Mr. J.P. Khaitan appearing on behalf of the petitioners in W.P. No.509 of 2012 ACCT Ltd. Anr. Vs. the State of West Bengal and several other writ petitioners in the Original Side, adopted the submissions made by Mr. Poddar and Mr. Kapur, emphasized that unlike the impugned Entry Tax Act earlier entry tax laws such as Tax on Entry of Goods into Local Areas Act, 1962 and Taxes on Entry of Goods into Calcutta Metropolitant Area, 1972 were enacted after obtaining previous sanction of the President of India. Mr. Khaitan ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on raw materials, etc. is not payment of tax on manufactured goods. Mr. Khaitan submitted that it is thus evident that the provisions of the impugned Entry Tax Act clearly discriminate between imported goods and goods manufactured or produced in the State of West Bengal. The former are subject to tax whereas the latter are not. The provisions of the Act are not saved by clause (a) of Article 304. Mr. Khaitan further submitted that that Rule 5(u) of the West Bengal Compensatory Entry Tax Fund Rules, 2012 is ultra vires the Entry Tax Act and the constitution of India. Mr. Khaitan submitted that in terms of section 16 of the Act, the proceeds of the levy shall first be credited to the Consolidated Fund of West Bengal and the State Government may, "if the State Legislature by appropriation made by law in this behalf so provides', credit such proceeds to the West Bengal Compensatory Entry Tax Fund ( the Entry Tax Fund ) from time to time after deducting the expenses of collection, for being utilised exclusively for the purposes of the Act. Mr. Khaitan submitted that in exercise of the rule making power conferred by section 22 of the Entry Tax Act, by a Notification bearing No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appropriated except in accordance with law and for the purposes and in the manner provided in this Constitution. Mr. Khaitan submitted that Article 283 is a miscellaneous financial provision and deals with custody, etc. of Consolidated Funds, Contingency Funds and moneys credited to the public accounts. Sub-article (2) of Article 283 reads as under: - (2) The custody of the Consolidated Fund of the State and the Contingency Fund of a State, the payment of moneys into such Funds, the withdrawal of moneys therefrom, the custody of public moneys other than those credited to such Funds received by or on behalf of the Government of the State, their payment into the public account of the State and withdrawal of moneys from such account and all other matters connected with or ancillary to matters aforesaid shall be regulated by law made by the Legislature of the State, and, until provision in that behalf is so made, shall be regulated by rules made by the Governor of the State. Mr. Khaitan submitted that Article 283 does not deal with appropriation of moneys out of the Consolidated Fund of the State. Detailed provisions in respect of appropriation are contained in Chapter III of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Legislature. It is settled law that there is no estoppel against the Legislature. It is clear that the Act does not contain any compulsory/ mandatory provision for credit of the proceeds of the levy to the Entry Tax. Fund to ensure its utilisation for the purposes enumerated in section 18. The levy under the Act is not compensatory. Mr. Khaitan also submitted that in order to qualify as a compensatory tax, it must be shown by the State that payment of entry tax is a reimbursement/ recompense for a quantifiable/ measurable benefit provided or to be provided to its payers. The State has not furnished any data or details whatsoever. States plea is that the levy is a new imposition is no answer. The State has not even come up with any projection of any kind. Mr. Khaitan submitted that the burden of the levy falls entirely on goods imported from outside the State. Goods manufactured or produced in the State are not subject to the levy. Assuming for the sake of argument that the proceeds of the levy shall be utilised for the development or facilitating the trade, commerce and industry in the State, the entire burden thereof has to be borne by the persons who import the goods into the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been formulated so that export goods manufactured/ produced in the country are not burdened with any tax levy. For example, advance import licences are issued so that raw materials required for export production can be imported duty free. Even indigenous raw materials can be procured duty-free. There are also special schemes granting export benefits for exports to South East Asian countries. Again, units located in Special Economic and/or Export Zones and/or 100% Export Oriented Undertakings are not liable to pay any entry tax and enjoy a distinct cost advantage. The object of all such provisions/ schemes made by the Government of India is to ensure that Indian goods are competitively priced and can stand in competition in the international market. It is submitted that the levy under the Act is entirely counter-productive since it makes the goods manufactured/ produced in the State of West Bengal by an importer-manufacturer costlier and uncompetitive. Mr. Khaitan submitted that thus, manufacturers/ producers in the State of West Bengal who import raw materials, plant, machinery, equipment, etc. from outside the State for their manufacture/ production activity face the prospe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stability and progress of the political and cultural unity of the country. As observed by the Supreme Court in Atiabari (supra) the makers of the Constitution had the occasion to consider the plinth and amplitude of Section 297 of the Government of India Act, 1935, which read as follows:- 297.(1) No Provincial Legislature or Government shall (a) by virtue of the entry in the Provincial Legislative List relating to trade and commerce within the Province, or the entry in that List relating to the production, supply, and distribution of commodities, have power to pass any law or take any executive action prohibiting or restricting the entry into, or export from the Province of goods of any class or description; or (b) by virtue of anything in this Act have power to impose any tax, cess, toll, or due which, as between goods manufactured or produced in the Province and similar goods not so manufactured or produced, discriminates in favour of the former, or which, in the case of goods manufactured or produced outside the Province, discriminates between goods manufactured or produced in one locality and similar goods manufactured or produced in another locality. (2) Any law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom creating some indirect or consequential impediment which may fairly be regarded as remote. Mr. Mazumdar submitted that in Cole v Whitfield ( Tasmanian Lobster case ) [1988] HCA 18; (1988) 165 CLR 360; (1988) 78 ALR 42; (1988) 62 ALJR 303, the Full Bench of the High Court of Australia revisited the law laid down in Commonwealth of Australia v- Bank of New South Wales (Banking case), which propounded the theory of direct and immediate restriction on trade and commerce and formed the sheet anchor of the judgement in Atiabari (supra) and held that the doctrine of direct and immediate effect is highly artificial. It appears that the judgement in Atiabari (supra) has been referred for reconstruction to a Larger Bench. However, no decision has yet been taken by the Larger Bench. The law laid down in Atiabari (supra) is binding on this Court and this Court cannot take any contrary view only because a foreign judgement relied upon in Atiabari (supra) has been reversed. Mr. Mazumdar argued that the ration laid down in Atiabari (supra) was revisited by Seven Judges Constitution Bench in Automobile Transport (supra). The Constitution Bench judicially evolved the concept of compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It would be impossible to judge the compensatory nature of a tax by a meticulous test, and in the nature of things that cannot be done. (h) Creation of separate fund would not be necessary. The Constitution Bench held that- Nor do we think that it will make any difference that the money collected from the tax is not put into a separate fund so long as facilities for the trades people who pay the tax are provided and the expenses incurred in providing them are borne by the State out of whatever source it may be. The issue of compensatory tax is a judicially crafted exception to Article 301 came up for consideration before the Hon ble Supreme Court in the matter of Jindal Strips Vs. State of Haryana reported in (2003) 8 SCC 60 (Jindal 1). The Supreme Court referred the matter to a Constitution Bench with the following observations:- Since the concept of compensatory tax has been judicially evolved as any exception to the provisions of Article 301 and as the parameters of this judicial concept are blurred particularly by reason of the decisions in Bhagat Ram (supra) and Bihar Chamber of Commerce (supra), we are of the view that the interpretation of Article 301 vis- -vis co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ire whether the trades people are having the use of certain facilities for the better conduct of their business and paying not patently much more than what is required for providing the facilities as held by the Constitution Bench in Automobile Transport case. (paragraphs 49). (x) The doctrine of direct and immediate effect of a law on trade and commerce under Article 301 as propounded in Atiabari (supra) and the working test enunciated in Automobile Transport (supra) for deciding whether a tax is compensatory or not vide paragraph 19 of the Report (AIR), would continue to apply and the test of some connection indicated in paragraph 8 (of SCC) of the judgment in Bhagatram Rajeevkumar (surpa) and followed in State of Bihar v. Bihar Chamber of Commerce (supra) was in the opinion of the Constitution Bench not good law. (paragraphs 53). (xi) The constitutional validity of various local enactments, which were the subject matters of pending appeals, special leave petitions and writ petitions, were directed to be disposed of in the light of this judgement. (paragraphs 53). Mr. Mazumdar appearing on behalf of the State submitted that there could be no doubt that Article 301 guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght of the other specific purposes, by applying the principle of an ejusdemgeneris. Mr. Mazumdar argued that Sections 9 and 20 of the impugned Entry Tax Act read with the West Bengal Compensatory Entry Tax Fund Rules, 2012, hereinafter referred to as the Compensatory Fund Rules , notified on 24th July, 2012 vests the Accountant General of West Bengal with the authority to manage the Compensatory Fund. Mr. Mazumdar submitted that the proceeds of the levy of Entry Tax under the impugned Entry Tax Act are wholly to be utilized for the purposes of adumbrated in Section 18 of the impugned Entry Tax Act. Thus, the impugned Entry Tax Act satisfies the working test of a compensatory tax as enunciated in Automobile Transport (Rajasthan) Limited (Supra). Mr. Mazumdar pointed out that in Jindal Stainless Steel Ltd. 2 (supra) the Constitutional Bench decided the questions of law referred to it. The various pending appeals were, however directed to be remanded to the respective High Courts for hearing and adjudication in the light of the principles enunciated in Jindal Stainless Ltd. 2 (supra) by an order reported in 2006 (7) SCC 271. Mr. Mazumdar pointed out that pursuant to the directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anagaram, Andhra Pradesh Vs. Commercial Tax Officer, Vizianagaram, Andhra Pradesh And Ors. reported in (1986) 2 SCC 479; The aforesaid judgements cited by Mr. Mazumdar are not, however, relevant since those judgements pertain to sales tax and other taxes which do not directly affect movement of goods and, therefore, did not hit Article 301 of the Constitution of India. It is immaterial that the rate of tax which is 1%, is reasonable, as submitted by Mr. Mazumdar. It is also immaterial that the goods are subjected to Entry Tax only once and that finished products cannot be subjected to Entry Tax if Entry Tax has been paid on raw materials. Mr. Mazumdar finally argued that Article 286 is not applicable to the impugned tax on entry of goods into local Areas for consumption or use therein under Entry 52, List II of the Seventh Schedule. Only the power to tax, sales are subject to the restrictions of Article 286. Imposition of Entry Tax under the impugned Act does not tantamount to tax on sale. Mr. Mazumdar submitted once the goods are cleared from warehouse the importation is complete. Applying the principles of law enunciated by the Supreme Court in Automobile Transport (Rajasth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticle 246 contained in the said part, which provides as follows:- 246. Subject-matter of laws made by Parliament and by the Legislatures of States. (1) Notwithstanding anything in clauses (2) and (3), Parliament has exclusive power to make laws with respect to any of the matters enumerated in List I in the Seventh Schedule (in this Constitution referred to as the Union List ). (2) Notwithstanding anything in clause (3), Parliament and, subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List ). (3) Subject to clause (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the State List ). (4) Parliament has power to make laws with respect to any matter for any part of the territory of India not included [in a State] notwithstanding that such matter is a matter enumerated in the State List. Article 246 demarcates the legislative fields ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution clearly provides that no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase takes place outside the State, or in the course of import of goods into or export of goods out of the territory of India. There can, therefore, be no doubt that no State tax can be imposed on sale or purchase of goods, where sale or purchase takes place in course of import of goods into or export of goods out of India. However, the question is whether the impugned Entry Tax Act in so far as the same purports to impose a tax on entry of goods imported from abroad into local areas, for consumption use or sale therein is violative of Article 286(1)(b) of the Constitution of India as emphatically argued by Mr. Kapur. Tax on the sale or purchase of goods has been defined in Article 366 (29-A) of the Constitution of India, set out hereinbelow:- 366(29A) Tax on the sale or purchase of goods includes- (a) a tax on the transfer, otherwise than in pursuance of a contract, of property in any goods for cash, deferred payment or other valuable consideration; (b) a tax on the transfer of property in goods (whether as g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in Section 15 of the Central Sales Tax Act, 1956. 68. No State can therefore by describing an item as a luxury, seek to levy tax on its supply. It cannot be disputed that as far as U.P. and A.P. are concerned, were it not for their interpretation of Entry 62 of List II, the tax would be referable only to Entry 54 List II. If Entry 62 List II does not allow the taxation of goods, the levy would not be constitutionally sustainable. 69. In our opinion, to read Entry 62 List II as including articles of luxury cannot allow all these constitutional restrictions to be bypassed allowing States to levy tax on the supply of goods by describing them as luxury goods. As has been rightly contended by Mr Parasaran appearing for the Union of India, the supply of luxury is nothing but the supply of goods since the goods themselves constitute the luxury 93. Given the language of Entry 62 and the legislative history we hold that Entry 62 of the List II does not permit the levy of tax on goods or articles. In our judgment, the word luxuries in the entry refers to activities of indulgence, enjoyment or pleasure. Inasmuch as none of the impugned statues seek to tax any activity and admitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Spinning Mills Vs. Collector of Customs reported in 1999 (113) ELT 753 (SC) cited by Mr. Mazumdar the Supreme Court held:- Attractive, as the argument is, we are afraid that we do not find any merit in the same. It has now been held by this court in Hyderabad Industries Ltd. and Anr. v. Union of India and Others [1999 (108) E.L.T. 321 (SC) = JT 1999 (4) SC 95] that for the purpose of levy of additional duty Section 3 of the Tariff Act is a charging section. Section 3 sub-section 96) makes the provision of the Customs Act applicable. This would bring into play the provisions of Section 15 of the Customs Act which, inter alia, provides that the rate of duty which will be payable would be on the day when the goods are removed from the bonded warehouse. That apart, this Court has held in Sea Customs Act, SCR at p. 803 that in the case of duty of customs the taxable event is the import of goods within the customs barriers. In other words, the taxable event occurs when the customs barriers is crossed. In the case of goods which are in the warehouse the customs barriers would be crossed when they are sought to be taken out of the customs and brought to the mass of goods in the country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1)(b) of the Constitution, is in respect of the levy of tax on sale or purchase of goods and not as regards entry of the goods into a local area for consumption, use or sale therein and, hence, the contention of the petitioners that levy of entry tax on goods imported from outside the State is hit by article 286(1)(b) of the Constitution of India has no force and is misconceived In Gulabdas Jagannath Vs. The State of Rajasthan reported in AIR 1995 Rajasthan 225 cited by Mr. Mazumdar the imposition of Octroi Duty levied under Entry 52 of List II of the Seventh Schedule to the Constitution on goods imported from outside the country, was held to be valid. In William Fernandez Vs. State of Kerala reported in (1999) 115 STC 591 (Ker) cited by Mr. Kapur the Kerala High Court found that the impugned Act did not impose any tax on goods imported from outside the country. The High Court, thus, held that the limitations in Article 286 had not been surmounted and as such the Act was inapplicable to the appellants, who had imported vehicles from abroad. The judgment has no relevance to the issue of whether imposition of a tax on entry of imported goods into a local area for consumption ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y relating to trade and commerce in any of the Lists in the Seventh Schedule. (2) Nothing in clause (1) shall prevent Parliament from making any law giving, or authorising the giving of, any preference or making, or authorising the making of, any discrimination if it is declared by such law that it is necessary to do so for the purpose of dealing with a situation arising from scarcity of goods in any part of the territory of India. 304. Restrictions on trade, commerce and intercourse among States.- Notwithstanding anything in article 301, the Legislature of a State may by law- (a) impose on goods imported from other States [or the Union territories] any tax to which similar goods manufactured or produced in that State are subject, so, however, as not to discriminate between goods so imported and goods so manufactured or produced; and (b) impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State as may be required in the public interest: Provided that no Bill or amendment for the purposes of clause (b) shall be introduced or moved in the Legislature of a State without the previous sanction of the President. Article 301 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that such preference and/or discrimination is necessary for dealing with a situation, arising from the scarcity of goods in some part of India. The impugned Entry Tax Act has also been attacked as violative of Article 303 and 304(a) of the Constitution of India, on the ground of discrimination between States and discrimination between goods which enter into a local area from another area within the State and those which enter the local area from outside the State which are liable to tax. In ITC Limited Vs. State of Tamil Nadu Ors (supra) the Division Bench of Madras High Court found that the impugned legislation was discriminatory, since Entry Tax was only levied on goods imported into the State of Tamil Nadu from outside the State, for consumption, use or sale within the State. The Division Bench found that goods which were produced or obtained within the State did not attract any Entry Tax at all, on their entry into a local area within the State. The Division Bench, thus, held that the impugned legislation was violative of Article 303(1) of the Constitution of India in that it discriminated against States and/or gave preference to the State of Tamil Nadu. In Bharat Eart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... States/union territories cannot be exercised to effect discrimination between imported goods and similar goods manufactured or produced locally. Article 303 provides that neither the Parliament nor the Legislature of a State shall have the power to make any law giving or authorising the giving of any preference to one State over another, or making or authorising the making of any discrimination between State and another, by virtue of any entry relating to trade and commerce in any of the Lists in the Seventh Schedule. Entry Tax is not levied under any entry relating to trade or commerce in any of the List in the Seventh Schedule. There is a distinct entry relating to Entry Tax i.e. Entry 52 of List II as observed hereinabove. The judgements of the Supreme Court in West Bengal Hosiery Association Ors. Vs. State of Bihar Ors. (supra) and Sri Mahavir Oil Mills Ors. Vs. State of Jammu Kashmir (supra) relate to entries regarding sale or purchase and/or trade or commerce. Article 304(a) enables the legislature of a State to impose on goods imported from other State or Union Territories, any tax to which similar goods manufactured or produced in that State are subject, so t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on similar goods at the place from which the goods originate. Section 4(2) of the impugned Entry Tax Act empowers the State Government, by notification, to specify the rate of tax to be levied under the impugned Entry Tax Act, which is not to exceed 5% when such tax is levied on the taxable turnover of imports, and different rate or rates of tax may be specified, in respect of different specified goods, or for the different categories of consumption or use or sale of such specified goods, or for different local areas. The State Government is not authorized to fix different rates depending on the place of origin of the goods, taking into account the prevalent rates of various applicable taxes in that place. The impugned Entry Tax Act is not protected by Article 304(a) of the Constitution. Under Article 304(b), a State Legislature may impose such reasonable restrictions on the freedom of trade, commerce or intercourse with or within that State, as may be required in public interest. However, no Bill or amendment to impose restrictions on the freedom of trade, commerce or intercourse, with or within the State, is to be introduced or moved in the Legislature of a State, without th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Company Ltd. Vs. State of Assam reported in AIR 1961 SC 232 the majority of the Constitution Bench of the Supreme Court held as follows:- 50. On a careful examination of the relevant provision of Part XIII as a whole as well as the principle of economic unity which it is intended to safeguard by making the said provisions the conclusion appears to us to be inevitable that the content of freedom provided for by Art. 301 was larger than the freedom contemplated by S.297 of the Constitution Act of 1935, and whatever else it may or may not include, it certainly includes movement of trade which is of the very essence of all trade and is its integral part. If the transport or the movement of goods is taxed solely on the basis that the goods are thus carried or transported that, in our opinion, directly affects the freedom of trade as contemplated by Art. 301. If the movement, transport or the carrying of goods is allowed to be impeded, obstructed or hampered by taxation without satisfying the requirements of Part XIII the freedom of trade on which so much emphasis is laid by Art. 301 would turn to be illusory. When Art. 301 provides that trade shall be free throughout the territory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the motor vehicle may from time to time cease to be used. The question before the Supreme Court was, whether Section 4 constituted a direct and immediate restriction on the movement of trade and commerce with and within the State of Rajasthan. The Supreme Court held:- The interpretation which was accepted by the majority in the Atiabari Tea Co. case, (1961) 1 SCR 809; (AIR 1961 SC 232) is correct, but subject to this clarification. Regulatory measures or measures imposing compensatory taxes for the use of trading facilities do not come within the purview of the restrictions contemplated by Art. 301 and such measures need not comply with the requirements of the proviso to Art. 304(b) of the Constitution. Whether a tax is compensatory or not cannot be made to depend on the preamble of the statute imposing it. Nor do we think that it would be right to say that a tax is not compensatory because the precise or specific amount collected is not actually used in providing any facilities. It is obvious that if the preamble decided the matter then the mercantile community would be helpless and it would be the easiest thing for the Legislature to defeat the freedom assured by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed by Article 301 by enacting a law under Article 302. Similarly, a law made by the State Legislature in compliance with the conditions imposed by Article 304 shall not be hit by Article 301. Article 301 thus provides for freedom of inter-State as well as intra-State trade and commerce subject to other provisions of Part XIII . 38. In the generic sense, tax, toll, subsidies, etc. are manifestations of the exercise of the taxing power. The primary purpose of a taxing statute is the collection of revenue. On the other hand, regulation extends to administrative acts which produces regulative effects on trade and commerce. The difficulty arises because taxation is also used as a measure of regulation. There is a working test to decide whether the law impugned is the result of the exercise of regulatory power or whether it is the product of the exercise of the taxing power. If the impugned law seeks to control the conditions under which an activity like trade is to take place then such law is regulatory. Payment for regulation is different from payment for revenue. If the impugned taxing or nontaxing law chooses an activity, say, movement of trade and commerce as the criterion of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ery benefit is measured in terms of cost which has to be reimbursed by compensatory tax or in the form of compensatory tax. In other words, compensatory tax is a recompense/reimbursement. 43. In the context of Article 301, therefore, compensatory tax is a compulsory contribution levied broadly in proportion to the special benefits derived to defray the cost of regulation or to meet the outlay incurred for some special advantage to trade, commerce, and intercourse. It may incidentally bring in net revenue to the Government but that circumstance is not an essential ingredient of compensatory tax. 46. whenever a law is impugned as violative of Article 301 of the Constitution, the Court has to see whether the impugned enactment facially or patently indicates quantifiable data on the basis of which the compensatory tax is sought to be levied. The Act must facially indicate the benefit which is quantifiable or measurable. It must broadly indicate proportionality to the quantifiable benefit. if the provisions are ambiguous' or 'even if the Act does not indicate facially the quantifiable benefit, the burden will be on the State as a service/facility provider to show by placing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble benefit is represented by the costs incurred in procuring the facility/services (which costs in turn become the basis of reimbursement/recompense for the provider of the services/facilities) to be provided in the "local area" concerned and Whether the entire State or a part thereof can be comprehended as local area for the purpose of entry tax? In Jindal Stainless Ltd. and Anr. (4) Vs. State of Haryana reported in (2010) 4 SCC 595, the States whose Entry Tax Laws had been challenged, contended that the tests propounded in Atia Bari Tea Company Limited (supra) and Automobile Transport (Rajasthan) Limited (supra) had failed to strike a balance between the freedom of trade and commerce under Article 301 of the Constitution of India, and the authority of the States to levy taxes under Article 245 and 246 of the Constitution, read with the appropriate legislative entries in the Seventh Schedule to the Constitution of India. The States sought reconsideration of the decisions of the Supreme Court in Atia Bari Tea Company Limited (supra) and Automobile Transport (Rajasthan) Limited (supra) by a larger bench. The Supreme Court was of the view that certain aspects which needed the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom Rs.1,500/- per seat per quarter to Rs.2,000/- per seat per quarter and later to Rs.3,000/- per seat per quarter, was under challenge. In R. Samthil Babu Vs. State of Tamilnadu (supra) the challenge rested on the ground that tax had been imposed indiscriminately, to cross subsidise stage carriage, and uneven burden had been placed on the owners of contract carriage, which had no nexus with the services or amenities provided. The levy was impugned as discriminatory and violative of Article 14 of the Constitution of India. The Supreme Court held that in a matter of that nature, quantifiable data formed the basis of the challenge, as otherwise, the challenge to the impugned levy, on the ground of irrationality of the levy, could not be decided. The Supreme Court found that the appellants had not been able to discharge the initial burden, as the writ petitions were sketchy and lacking in material particulars and accordingly, allowed the writ petitions to be withdrawn, with liberty to file a proper writ petition, if so advised. Where the challenge to an action is required to be adjudicated on the basis of factual data the burden would be on those attacking the action to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view that as soon as it was shown that the Act invaded the right of freedom of trade, it would be necessary to enquire whether the State had proved that the restrictions imposed by it by way of taxation were reasonable and in the public interest within the meaning of Article 304(b). As submitted by Mr. Khaitan, the entire burden of the levy under the impugned Entry Tax Act, has to be borne by persons, who import goods including raw materials into the State. May be, the cost of goods manufactured in West Bengal, using raw materials imported from other States or from abroad, would be higher in comparison to the costs of similar goods manufacture in a State, which does not impose any Entry Tax, and thereby adversely affect sales of such goods, as argued by Mr. Khaitan. Some of the writ petitioners might also rightly be aggrieved by imposition of the levy, only on goods imported from outside the State, since the benefit of the development, if any, would be enjoyed equally by manufacturers/producers in the State who do not have to make any imports. However, hardship, inconvenience or irrationality are no grounds to sustain a challenge to a Statute enacted by legislature, in exercis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hy Amma (supra) cited by Mr. Poddar, that the effect of a judicial pronouncement of a competent Court cannot be nullified by the legislature in exercise of its legislative powers, for any reason whatsoever, is unexceptionable. The Legislature can, however, validate any law, that has been declared ultra vires, by re-framing it, removing the infirmities, which led to the law being declared ultra vires. In enacting the impugned Entry Tax Act, the West Bengal State Legislature has not nullified any judicial pronouncement. The State Legislature has not merely re-enacted a new law retaining unaltered the provisions of the Act of 2001, which had been struck down by the West Bengal Taxation Tribunal. An attempt has been made by the State Legislature to reframe the law and cure the defects in the Act of 2001, that existed prior to the judgement of the West Bengal Taxation Tribunal in National Hydro Power Corporation Limited (supra) that rendered the Act of 2001 unconstitutional. As observed above, the object of the impugned Entry Tax Act, as declared in its preamble, is to set up a Compensatory Entry Tax Fund. The recital of the impugned Entry Tax Act also states that the levy and colle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the enactment impugned. If the impugned enactment does not facially disclose sufficient data to establish the proportionality of the levy to the quantifiable benefit, or if the provisions are ambiguous or vague, it would still be open to the State, as service provider, to show, by placing materials before the Court, that payment of compensatory tax is a recompense and/or reimbursement for the specific, tangible, measurable, quantifiable benefits provided or to be provided to its payers. In Kamaljeet Singh Ors. Vs. Municipal Board Pilkhwa and Ors. reported in (1986) 4 SCC 174, the valdidity of imposition of a toll tax imposed by the Municipal Board Pilkhwa, on vehicles and other conveyances, animals and laden collies entering the Pilkhwa Municipal area, under Section 128(1)(viii) of the U.P. Municipalities Act, 1916, upheld by the High Court was questioned before the Supreme Court. The Supreme Court held:- The High Court has upheld the levy of the toll tax relying upon the decision of this Court in Automobile Transport (Rajasthan) Ltd. v. State of Rajasthan as being compensatory in nature. In Automobile Transport case, the majority held that regulatory measures imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion before the Division Bench was, whether the levy of Entry Tax under the said Tamil Nadu Tax on Entry of Motor Vehicles into Local Areas Act, 1990 could be justified as a compensatory tax. The aforesaid question was answered in the negative. The Division Bench held that there was no connection or nexus between the collection of Entry Tax, and its utilization for the benefit of traders/manufacturers from whom such tax was collected and consequently the levy of Entry Tax was unauthorized and violative of Article 301 of the Constitution. The Division Bench observed as follows:- The essence of compensatory tax is that the services rendered or facilities provided should be more or less commensurate with the tax levied. Services provided will have a direct co-relation with the trade. The main basis of compensatory tax is the quantifiable and measurable benefit represented by the cost incurred in procuring the facilities/services. The cost in turn becomes the basis of reimbursement/recompense for provider of services/facilities. As held in Jindal s case [2006] 145 STC 544 (SC); [2006] 7 SCC 241, the compensatory tax is a charge for offering trade facilities and they are based on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of reimbursement/recompense for the provider of services/facilities. From the point of view of Government, as stated by the apex court in Jindal Stainless Ltd. s case [2006] 145 STC 544 (SC); [2006] 7 SCC 241, a compensatory tax is a charge for offering trading facilities and they are based on the principles of equivalence. Applying the above test, it cannot be said that maintaining of roads, providing bridges, etc., is compensatory in nature so as to meet the outlay incurred for some special advantage to trade, commerce and intercourse. Providing the above facilities and its use may incidentally bring in net revenue to the Government, but that circumstance is not an essential ingredient of compensatory tax ... Some indirect connection or some connection, more or less commensurate, etc., are not the tests, but the direct and immediate effect is the test. Maintaining of roads, bridges, etc., and promotion of SSI units, etc., are generally met from the general funds or revenue. Whether goods are transported into the State from outside the State or abroad the State has got a duty to provide those facilities, like roads, bridges, etc., which is being enjoyed not only b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate any exclusive or special service provided to the class of taxpayers who bore the tax under the Karnataka Special Tax on Entry of Certain Goods Act, 2004. The Court also held that imposition of tax only in respect of the goods brought into a local area by an importer from outside the State and not on other persons who brought similar goods to the same local area from other parts of the State was discriminatory and violative of Article 304(A) of the Constitution. The Court also observed as follows:- The concept of a compensatory tax being outside the purview of Part XIII itself as propounded in the case of Automobile Transport (Rajasthan) Ltd. AIR 1962 SC 1406 and as explained in Jindal Stainless Ltd. s case [2006] 145 STC 544, is that a levy which is exclusively for meeting a special service or benefit to the taxpayer is not even in the nature of a tax or a general levy and is more akin to the taxpayer receiving the service from the State and paying for it. Such is not the situation in the present cases and under the enactment under challenge. In National Aluminum Company Limited Ors. Vs. State of Orissa Ors. reported in [2008] 15 VST 296 (Orissa) cited by Mr. Kapur t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Jharkhand and amended vide Jharkhand Tax on Entry of Goods into Local Areas for Consumption, Use or Sale thereof (Amendment) Ordinance, 2001 was ultra vires Articles 301 and 304 of the Constitution. In Indian Oil Corporation Limited Vs. State of Assam reported in (2009) 21 VST 76, cited by Mr. Mazumdar, the validity of the Assam Entry Tax Act 2008 and the Rules framed thereunder, along with the provisions of the Entry Tax (Amendment) Act, 2008, were in question. The Division Bench of Assam High Court, on considering the relevant provisions of the Act, the rules and in particular the affidavits filed on behalf of the State of Assam, found that the tax sought to be imposed was compensatory in nature. A perusal of the judgement reveals that quantifiable data had been produced to satisfy the Court that the levy was in fact compensatory. The Assam High Court noted that part of the tax was spent for providing security to the pipelines of ONGC, which were used by the writ petitioners to import oil into the State of Assam. The Tax was thus in the nature of quid pro quo for utilisation of pile lines. The Assam High Court observed:- Additionally, the provisions of section 10( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess activities. In Godfrey Phillips India Ltd. Vs. State of Madhya Pradesh Ors. reported in (2008) 17 VST 467 (MP) cited by Mr. Mazumdar, a Division Bench of Madhya Pradesh High Court upheld the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 inter alia holding that levy under the said Act was compensatory in nature. Mr. Mazumdar submitted that the trend of the decisions of different High Courts rendered after the judgement of the Constitution Bench of the Supreme Court in Jindal Stainless Ltd. (2) (supra) show that statutes enacted after the said judgement, declaring that the taxes imposed were compensatory, for benefits to traders as specified in those Acts, were upheld. However, Statutes enacted before pronouncement of the aforesaid judgement which did not indicate that the taxes levied by the Statues were compensatory, were struck down as ultra vires the Constitution. It however appears that in the cases of those Statutes which were upheld, the High Courts not only considered the provisions of the Statutes, but also data and other materials disclosed in the affidavits and were satisfied that the levies against those statutes were to provide spe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lfare activities. A tax can be said to be compensatory, only if the impugned enactment under which the tax is imposed, facially and patently indicates that the tax is a recompense for specific, tangible and measurable benefits for the tax payers as a class, for facilitating trade, commerce and intercourse. The impugned enactment would facially have to indicate that the benefit, which was quantifiable or measurable, was also more or less commensurate with the levy. In case the Act impugned does not disclose the corresponding measurable or quantifiable benefits and other relevant data, or if the provisions of the Act impugned are ambiguous, vague or too wide, it would still be open to the State to disclose particulars of completed projects, projects in progress and projects in contemplation, approximate/estimated costs thereof, project reports and plans and estimates of the amount proposed to be realized from the levy impugned, to show a discernible link between the levy and the corresponding benefits. An estimate of costs of proposed projects to facilitate trade and commerce, or of taxes expected to be realized, can never be exact. Realization of taxes, which varies according ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing the Money Bill the State Legislature would be bound by the provisions of the impugned Entry Tax Act and would make appropriate budgetary provision, the withdral of the money credited to the Compensatory Entry Tax Fund would depend on enactment of law, in view of the express provision of Section 16 of the impugned Entry Tax Act. There is, thus, no guarantee that the proceeds of the Entry Tax would actually be utilized for the purposes specified in Section 18 of the said Act. While these writ petitions were being heard, the Government of West Bengal, Finance Department, Budget Branch issued Notification No.766 FB dated Kolkata, the 24th July, 2012 framing West Bengal Compensatory Entry Tax Fund Rules, 2012. The notification dated 24th July, 2012 issued by the Government of West Bengal Finance Department, Budget Branch is in itself contrary to Section 16 of the impugned Entry Tax Act and apparently inconsistent with the Constitution of India particularly Article 266(3) and Article 199(1)(d), as argued by Mr. Poddar and Mr. Khaitan. The Rules framed in exercise of power conferred by Statute cannot be contrary to the provisions of the Statute. A committee comprising of secre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ost of which, if read and understood as per their plain meaning pertain to general development of the State, and are within the ambit of the general duties of the State to all its tax payers. In examining the constitutional validity of the provisions of a statute, the presumption is on its constitutionality and the onus is on those who challenge the vires of the statute to show that there has been transgression of constitutional principles. Of course, once a case of transgression of constitutional principles is made out and a levy on entry of goods into any particular area is shown to impede free trade, commerce and intercourse throughout the territory of India, the onus would shift on the State to show that the levy is in the nature of reimbursement and/or recompense for benefits provided or to be provided to the tax payer. It is also well settled that the Court adjudicating a challenge to the validity of the provisions of a statute may, if possible, interpret the provisions of the statute in a manner that saves those provisions from constitutional invalidity. Needless to state, that in doing so, the Court must be very cautious so that it does not embark upon the legislative f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... general development of the State. There are, as pointed out by Mr. Kapur, glaring errors in various provisions of the impugned Entry Tax Act, which render the said provisions unintelligible, particularly Sections 16 and 18(1)(c). However, it is well settled that grammatical errors, inadvertent omissions and the like are no grounds to strike down a statute that is otherwise comprehensible and workable. It is also difficult to accept Mr. Kapur s submission that if the Act contains defects, which render a provision meaningless, the Court cannot cure the same. It is true that the Courts should not ordinarily transgress into the legislative sphere of enactment, reenactment and amendment. This court may, however, interpret a statutory provision in a manner, that renders the provision workable and constitutional. Section 16 as enacted reads as follows:- Section 16. Crediting of proceeds to the Fund The proceeds of the levy under this Act shall first be credited to the Consolidated Fund of West Bengal, and the State Government may, if the State Legislature by appropriation made by law in this behalf so provides, credit such proceeds to the Fund from time to time, after deducting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rading activities would render the levy a tax to collect revenue. This court may thus construe roads and bridges in Section 18(1)(a), to read special roads and bridges for carriage of goods. Similarly construction development and maintenance of linking the market areas in sub-clause c would make no sense unless the Court reads the word 'roads or may be roads and bridges as in Clause (c) into Subsection (b), and construe roads and bridges in the manner indicated above. Utilization of the proceeds of Entry Tax under the impugned Entry Tax Act for the purpose specified in Sub-clause (g) of creating, developing and maintaining pollution free atmosphere in the concerned areas has remote connection, if not, no connection with developing and facilitating trade and commerce, even though the same might improve the quality of life for citizens. Taxes utilized for keeping the environment free of pollution, would not qualify as a compensatory Tax. Be it mentioned that individual industries are responsible for ensuring that they conform to the environmental norms. Similarly vehicles including those which carry goods, are required to comply with pollution norms. The cost of rail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax, the onus lies on the State to show the exact purpose or purposes for which the levy is imposed, which should be identifiable, measurable, directly beneficial to the tax payers as a class, who in the instant case, would primarily be the traders and manufacturers of the local area, who import goods from outside the State and/or outside the country. The State has failed to disclose details of projects in contemplation, projects in progress and/or completed projects, providing facilities to the trading community, which the levy would pay for, and show that the expected proceeds of such levy are more or less equivalent to the estimated expenditure on such projects. To qualify as a compensatory tax, the Statute imposing the tax must facially indicate that the tax is a recompense for identifiable, measurable benefits to the class of tax payers as a whole on the principle of equivalence. If the statute does not contain particulars of the corresponding benefits in return for the tax, details may be disclosed by affidavit. It is reiterated that a compensatory tax would not cease to be a compensatory tax, only because of some excess collection, which may have to be diverted towards th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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